tv Fast Money Halftime Report CNBC August 2, 2012 12:00pm-1:00pm EDT
. "squawk on the street" fast money halftime report is up next. guys, thank you, welcome to a special edition of halftime, we're all over two big stories a the this hour. the market's reaction to today's ecb meeting and the trading glitch at knight capital. it's been a rough 24 hours for knight to say the least. shares plunging as it says the trading fiasco will cost the company some $440 million. questioning the company's ability to stay in business. we'll talk to richard repetto and we'll have a special round table on what means for you. all talk and nor action from ecb
president, mario draghi. who says he's ready to do a lot more, but offered no immediate steps to stem the debt crisis. we're at the market lows of the day. there's the nasdaq, a a loss of .65%. the s&p 500 off by more than 1% and the dow industrials off by more than 1%. the euro as well, it was higher. not any more. reversed. and the ten-year has reversed as well. yields initially surging, now lower on the day. cnbc's steve liesman joins us to discuss all of these stories. stephanie, how are you trading it? the fed is not coming to the rescue, neither is the ecb. >> for now. but i would say that expectations are very high. markets have rallied 2.5% since draghi spoke last week. we didn't get nearly the level of detail we wanted. but i think we got a couple of nuggets that you can point to in terms of the short end, in terms of the size, they note that size
matters, i think that we've been picking at symptoms that have gotten hit today. again we're kind of doing the diversified approach. we're buying a little of bristol-myers, because it's getting hammered, but we're buying ge and devon as well. >> steve, what happened? >> all coy think about was maxwell smart who said this place is surrounded by 100 crack alpine troops. and then he said, two st. bernards in heat. it was the expectation of a huge reaction and then at the end of the day, not very much. if you look at what's bothering the market, i'm calling it the draghi on the market today. what it is, it's the maze, it's the maze in the woods. i don't know if they have it in back, but we may undertake bond purchases if they're tried to the european rescue fund and we may take -- there it is, we may drop our demand for seniority. purchases will be tied to the rescue fund conditionality.
i think what you were talking about, we were holding our own and we went down further. i think there's been several evaluations of this. if this is implemented, it could be potentially very powerful. this is something that would have been great six months ago to say this. and it could be great six months from now, when it's put in. what do you do in the meantime? in the meantime you have to wait for spain to say we need help, sign up for a program and then the ecb could come in and in the blink of an eye, without doing very much, if we could put up like the two-year spanish bonds or the ten-year, whatever you guys got back there. the intraday, it could bring those rates down just by saying we are going do come in in an unlimited way, because now spain is part of it. but there's no request. it will be interesting to see, what would happen, what the traders would do if spain steps forward and farmally asks for a rescue, what would happen to the two-year at that point in time. >> the problem with everything that happened today, is he said last week they were going to be there.
he essentially said the same thing today, whereas the market wanted more action today. didn't even dlimpb a rate cut, steve and that's largely being overlooked in everything we're talking about today. >> can i point out the imf has complained about this? i don't know how well reported this has been. but the imf said we like what you did here, but further monetary easing to scott wopner's point and unconventional support would ease tensions. so the imf is saying draghi didn't go far enough. >> could he throw a bomb today with the rate cut? could he have done it and why didn't he do it? >> i don't know the reason for that i have enough trouble getting inside mr. bernanke's head, let alone mr. draghi, he is his own man, he's walked back a bit. all hope is not lost here if they come in, if the ecb becomes part of the rescue fund, i think it's potentially powerful. i think markets are right to be disappointed. >> what's the next step? >> the next step is september. >> they have could come up with rules of central bank of engagement and then somebody has to step forward. so let's say those bonds blow
out. okay? and let's say spain has said, we can't do this on our own. they ask for a rescue fund, negotiate that for a while, they have money from the efsf. still not clear if the ecb could act before the formal implementation. clearly we already know, and i've reported this, the germans disagree with this already. >> brian kelly, so lack of answers means dow jones industrial averages down 137 and counting. >> mario draghi said a lot of things, i may do this, i may do that. he may have said, i may buy a red nose and join the clowns. nothing happened today. there are so many uncertainties now, will the esm get approval by the german constitutional court? what does it mean? does it mean that spain coming to the efs, is it now at the brink of bankruptcy? again europe is at the brink
here and this has been the pattern for the last two to three years. and we're still there. so the market i think finally is starting to throw in the towel on this. >> guys, guy you know central bank were left out in the cold over the last 24 hours, right? bernanke, more talk, no action, drawingi, more talk, no action, what do you do? >> we're one headline away from the market being up 30, s&p. >> what's the headline, guy? >> as you mentioned, spain, we need help. >> we need help. >> the headline is draghi shoots bazooka. >> we need help, help us, we're raising our hand. >> you know that we've seen it 50 times over the last year where negative headlines take us down, 20 s&p positives. net we've been up on headlines. i don't think the trend is going to stop any time soon. i'm in the camp that think the world's coming to an end. i think as long as we stay above 1344 in the s&p we're fine. today feels bad, but the vix is
telling you, maybe the folks don't think it is as bad as it is. and doc can speak to that and to steve's point, when he talks about maxwell smart, all i can think of is 99. >> what are your thoughts on the market expectations regarding the ecb meeting, what we didn't get and now the market reaction to it? >> sure. well i'm with gilles, 99 all way, gilles. and animal husbandry with saint bernards, not interested, steve. clearly the market did want more and i think draghi and bernanke both understand is when they bring it, it works better if it's a surprise, guys. rather than at one of these meetings. the ecb has already made such moves in the past, so has our fed. think those are more effective. especially given it might be some sort of coordinated effort that might have to happen because of exactly the kind of headline gilles is talking about. if you get spanish bonds blowing
out or italian bonds, that's when i think they fire that bazoo bazooka, steve. they didn't have to do it yet, just the jawboning last week moved us as stephanie said, 2.5%. now we give up 1% here it doesn't feel like there's much. >> i have to ask, though, is this a sign of weakness on part of the central banks? if they're resorting to this talk, does it mean that they're unwilling to pull the trigger or don't feel like they have a bazooka to pull the trigger on? >> i think what they need is they need that emergency. all of these guys, look at hank paulsen. hank couldn't get anything done until we had the gun to his head and he had to go on his knees to nancy pelosi. until you get that kind of situation, you can't get the germans on board with this. that's what i think it's going to take. >> goiz, that doesn't sound like an environment that i want to buy stocks in, if we're talking about a major emergency before there's any ecb or fed help. >> steve, stick with us, let's bring in one of the best voices
in the business on all this. paul richards, global head of fx over at ubs. good to have you on the show. trying to figure out what the next move from the ecb is. were you surprised by what didn't happen today? >> i was very surprised. the market was looking for the bazooka, scott, i think we got a blunt knife. no mention of an esm banking license, no rate cut despite the fact of acknowledging benign market expectations, he told us that the bundesbank has expectations with the program. the market was expecting more after the big comments of a week ago and you know, i think for the euro to be down 2% and for bonds to be back above 7%, they are exactly where they should be after what was delivered today. >> why didn't he deliver at the very least a rate cut? >> i think he should have. i, i really think he had an issue with the germans. i think that he saw some push-back from merkel. he was seeing push-back from the
bundesbank, he should have given us something. at a minimum, the a rate cut would have been something. i feel like he wanted a package. i think he was incredibly well intentioned a week ago, but ultimately he had nothing to deliver. >> steve liesman, paul, is with us as well. i think the point we're getting from this is that the germans remain somewhat of a hindrance from something more substantial being done. steve has reported over the last several days regarding the bunds bank as well. right, steve? >> absolutely. i thought they had perhaps come up with a compromise. paul, was it clear to you from draghi's comments that even if the bond purchases are tied to the euro rescue fund that the germans would still object under those circumstances. >> i think to me what draghi wants or what the germans want. i think they want spain it put their hand up and say look, we need help. that's a really big ask to give
you sovereignty over your tax base. i don't think spain is there yet. so we're at a point where again -- >> standoff. >> it's a standoff and it's going to have to get worse before something gives. >> i can imagine paul, a scenario where if spain asks for help, at that exact point, the ecb comes in and says we are going to set the level of the two-year at 100 basis points over the average of for example, the eurozone. that's a pretty powerful act. if a central bank should come in with an unlimited guarantee of a spread of a sovereign over in the event there's a program. does that sound to you far-fetched? that's what went through my mind when i heard draghi tying it to the efsf. >> are they there yet? it's a big ask for this government. and you know, i just think it's going to have to get worse before it gets better in that environment, you've got to put your money somewhere, in europe or the u.s. i'll favor the dollar any week in august. >> when you say the situation
may have to get worse, does that mean the euro breaks 120 and then it's look out below and that's what draghi and some others over there fear more than anything. >> my target has been $118.50. we saw the rally up to $126.50. you and i spoke at the time and i was calling for 1 $25. >> i think the lot depend on the u.s. data we see tomorrow and i think 118.50 is a fair target and the market should pause and say what happens next. in the meantime, the euro does break 120. >> now you look to tomorrow and the jobs report. how does that factor in all of this, paul? >> weekly claims have been trending lower. the adp data is inconsistent, but it was better. what if we were to see a $150,000 number tomorrow. and monetary policy with europe. you have to say the euro would break 120 -- i would be going
into the number tomorrow, and bearish the euro. >> we'll talk to you goon for sure. paul richard ahead of global fx over at u.s. getting reaction from retail brokerage companies on knight trading glitch. kayla thompson with more. >> if you take a look at stocks of trading platforms like knight trade, they're falling on knight capital sympathy. some more than others. knight being a market maker, it carries out trades on behalf of clients, many of those retail investors trading via online plat forms. and according to filings, td has only about 4% trades routed through knight, while ameritrade has 10% of its trade routed through knight. privately held scott trade has 40% of trades route the through knight. you can't see that stock sympathy because it's privately held. many of the trades now being
directed elsewhere. even though it's unclear whether any of the direct trades were affected. we have calls out to the major players but for now, td now saying we do have contingency plans in place we could execute if these. but seeing as it's still business as usual, we'll continue to who monitor the situation and make decisions as warrants. td said there was no impacts to its trades yesterday and all client trades were cleared appropriately to its knowledge. we're waiting word from other trading par anywheres. that's the latest on that situation. >> lots more halftime report is under way. we'll tackle the market's reaction to the fall zwrout.
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of roughly $440 million. but what does it mean to you the investor, what does it mean to knight going forward? let's welcome rich repetto principle at sandler o'neill. rich, good to have you on the show. tom joyce is ceo of knight said his goal is to stay in business. can knight do that? >> yeah, i mean they certainly are going to be pressed for capital. given the size of the loss here. they have some assets, some other trading plat forms they own. one that they own fully, another called hot spot. other, another exchange called direct edge where they own a 20% stage. so it's not going to be, like he acknowledged, there's some work to do here. but hopefully they're going to make it through this. >> how long do you think knight has to do some kind of deal? >> i mean, if things, as you reported earlier, retail brokers
still supplying flow to them and business as usual, we certainly know business isn't as perfectly usual as it was the day, two days ago. but as long as they're still seeing flow from ameritrade, we think they have a reasonable amount of time you know to look for more capital. >> are you unable to answer the question, given the unknowns that still exist? i'm trying to figure out what unknown you know, means, i mean how long do they have? >> well, i mean you don't know how fast, we don't know how much business is still going to them right now. if they're still continue to see the flow, we don't know the day-to-day, whether there's a cash burn or a cash profit at this point. capital levels, they still clear. there's going to be capital need to continue to support the clearing operations. so it's a little bit more complex picture. really only knight knows right now. >> who do you you think wins and it's a tough word to use, in all
this. but what, what other company would benefit from some of the issues that knight is unfortunately suffering? >> i think there isn't a lot of winners in a situation like this but some of their competitors, like citadel, a large wholesale market maker that takes flow from the online brokers, he they're probably going to gain some share. ubs is another. some of the other automated market makers like get go and vert 2. but citadel probably stands to win the most right now. >> were you shocked by the number, rich, $440 million? >> i was absolutely shocked. we ran numbers, scott, once we knew what stocks were involved, 140, that the nyse was looking at yesterday, we took a look at the prices at the open. looked at the volumes, and we couldn't come up with a number that was you know, much beyond $200, $250. to see a $440 million loss was a big surprise this morning. >> brian kelly, do you have a
question? >> hey, rich, i'm looking at the bonds today were actually trading 70 cents on the dollar. we know they're going to have to be recapitalized some way with the stock down 50% today, which would you buy here? is the stock a buy on the idea it's going to get broken up and there's assets there, or do you go buy the bonds, trying to replay the capitalization? >> i'm not probably comfortable recommending the bonds at this point. we don't know what the the scenario is. we'll have to wait and see what the cash burn is and whether the customers stay with knight. they're going to need the likely need a little influx of capital. at this point, you know, it's, this is a situation that's in flux. we're not telling people they should be buying at this moment. either way. >> rich, have you had conversations with tom joyce, the ceo of knight? >> we traded emails last night. >> but you haven't spoken since
the 440 million number came out? >> no, we haven't. >> do you have any indication of the stat us of credit lines, kourn counterparties at all? >> no, knight has chosen, they haven't done any analyst call. other than his one appearance on tv this morning. and the release, we don't know what's going on with knight. we're doing the best we can as you are. to do the checks and the channel checks to see who's still doing business with them and the peripheral checks, but we don't know, like knight is the only one who really knows, you know, their situation at this point. >> if they get the liquidity by some miracle, from a reputation point of view, can they ever make it back? >> yeah, i mean you know, this is going to be a blemish. tom was outspoken, the ceo was outspoken against the nasdaq, they're going to, it is going to be a hit. but these people, the ameritrades of the world, the scott trades have decade of
experience of sending flow to knight. so as long as they bolster their balance sheet, and again, you know that is an if. but if they can do that relatively quickly, these players are very comfortable with knight and i believe they're going it take a look at this and maybe make some azwrumts, but look at it as a one-time glitch, which hopefully it was. >> rich, thanks for coming on. >> good to see you. >> well the knight capital debacle is the latest in a string of events that have been just killing investor confidence. from the flash crash to the facebook ipo, is the rise of the machines good or bad for investors, here to take on that debate, doug cass, founder of sea breeze partners, he argues that electronic trade something dangerous for investors. chester spat, investor at the temer scoop of business and former chief economist at the s.e.c. argues it's a benefit. irene aldridge, her firm builds high-frequency trading systems for clients and broker dealers
and our own john najarian who actively trades the markets daily and tracks the distortions that high-frequency trading has caused. other traders on the panel free to enter the discussion as they see fit. doug cass, i'll start with you. the blow to investor confidence is what as you sit there trying to manage money? >> i say kill the technology before they kill us. in life and in the markets, the subject today, it's like the billy joel song "it's only a matter of trust." and i think one of the unintended consequences of technological innovation, innovation which is done a lot of time under the not so watchful eye of the s.e.c., and regulatory authorities, is really disruptive to the marketplace. and giving investors both retail and institutional pause with regard to re-entering the markets -- >> mr. spat you've made the argument that high-frequency
trading, electric trading in general is good for the markets. is it more bad than good? at this point? just given what we've seen of late. whether you take the facebook ipo, the attempted bats ipo, bring in the latest instance and certainly others? >> absolutely not. the markets have benefitted tremendously from a dramatic reduction in trading costs over the last decade brought about by technological innovation. compare the market structure today to the way our market structure worked a decade ago when spreads and trading costs were dominated by monopoly specialists on the new york stock exchange. the costs day in and day out for trading equities are tiny. and the blemish here is really a cost that's going to be incurred by knight. i think that's crucial. >> doesn't the investor pay a
steep price as well. doesn't the psyche of the individual investor watching right now pay a steep price as well? >> well i don't know about the psyche. but i know that a buy-hold investor who is following long-run investment strategies, is not going to be, should not be affected by these, by these, by these sorts of actions. where our regulators really ought to focus to the extent they want to improve the markets, and reduce trading costs to investors, they should take a hard look at the outrageous spreads that retail investors trade when they trade corporate bonds and especially municipal bonds. where you see still spreads of -- you see spreads of 5% or more. >> yeah, doug? >> he's deflecting the whole argument. there's a big difference between the disruptive impact of high-frequency trading strategies, and reduced commissions to transact. the buy and the sale of stocks,
these are two different things, we've had this -- yesterday is just the latest trading gaffe of a series of nightmares on wall street. it's as if freddy kruger with these high-frequency traders are taking an axe to the heart of retail and institutional traders, it's no wonder that everyone has derisked. >> it's not about commissions, it's about the trading costs that are created by competition and genuine competition in a marketplace. and it's important that we promote competition. that's dramatically reduced the trading costs over the last decade. >> guys, let me bring in irene aldridge. her firm builds high-frequency trading systems. >> we build it. we trade ourselves as well. and first of all, many peent don't understand what high frequency trading is about. it's a given. i teach a course on that it's
hftcourse.com. let's look at what has happened with knight capital yesterday. somebody fell asleep at the wheel. for 45 minutes. while driving down the l.i.e. expressway at the super-high speed in let's say audi. it's a human person who had not noticed that, these huge amounts of trading, which have gone through completely wrong. for 45 minutes. nobody put their finger to their brain and this is not the fat finger, this is a fat brain error. >> wasn't this a technology error? >> it was a technology error. >> technology broke down. >> but the technology broke down. >> in a highly fast-trading system and infrastructure in which we work now, technology failed us. >> and cars break down, too. but when people fall asleep and don't notice, that the car broke down, for 45 minutes, they create a ton of damage and they
get taken off the road and they are held liable. there's ultimately a person sitting in front of the computer. should be sitting there saying oh my god, our risk limits are breached, we have to do something. there has to be a compliance process. there has to be processes in place, that they weren't there. i think this is the real issue here. is that and doug, what you're suggesting is that everybody now trades in their mercedes and audis for a beat-up honda. so we can all drive at slow speeds of 35 miles per hour. but who cares if people fall asleep? so when people fall asleep on the highway, they are held liable. >> firstly, this is not an isolated situation. >> we had the bats global ipo months ago. two weeks ago we had the facebook ipo. we had the flash crash in 2010, whose derivation is still
unknown. high-frequency trading averages being disrupted. creating unusual momentum. these are traders that have no ideas about balance sheets. pricing momentum that are serving to make extreme moves on a daily and intraday basis. >> and people like john najarian who are trying to navigate these markets. john, what's the fallout for a guy like you? >> i think the two proponents of high-frequency trading, both of them addressed competition narrowing spreads and/or lowering commissions. i don't think you need .001 of a second trading. you don't have to trade all the way down from the mercedes or from the audi down to a horse and buggy. but it is going too damn fast. and it's going so fast that you can't get competition, you're not engendering competition at that .001 of a second speed.
>> there's lots of competition, there's many, many trading firms. >> oh yeah, there is, but not at .001 of a second there's not. there's no competition at .001 of a second. >> we used to think 30 seconds was, was a a reasonable amount of time for competition. obviously speeds have changed. to the extent that we impose restrictions, that basically restricts the actions of traders over whatever -- >> which is exactly what mary have a pirro should be doing, should be putting in restrictions on trading orders -- that are trading at a thousandth of a second. >> market, restricting cancel orders would dramatically underkit the liquidity of the markets. because it would prevent -- >> i'm going to jump in, i'm going to jump in -- headline hello, i'll give irene the last word. in the quest for speed, in the
quest for the lowest price that we can possibly get, aren't we sacrificing something? aren't we sacrificing the security of the very markets that individual investors try and trust in, every single day? and repeatedly, repeatedly they are left holding the bag asking questions? >> and computer system are built by humans, and the humans who build these computer systems and fail to supervise these computer systems, should be held accountable, just like people fall asleep at the wheel. people who fall asleep at the wheel are held accountable. if they cause damage to people. 's not poor knight, their stock price has dropped. it's more like hey dude, come with us this way. >> irene, one last point. speed kills, irene. >> doc, come to my course. >> thanks to all of you. chester spatt, cass, john
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. welcome back to halftime. we want to touch the markets and bring your attention to headlines that are moving right now. you'll see them at the bottom of the screen here. and they do center around knight capital group. knight said to be in discussions about a a possible deal with electronic trading firm, virtu. shares of knight down 54%. down about, about that level for most of the day. the fallout continuing over the trading glitch yesterday. knight's losses, about $440 million according to the company. another headline here, knight also said to be in talks with virtu and private equity, as well, talks said to be in the early stages, no deal is guaranteed. again here's the one i was just trying to read here about possible deal with electronic trading firm, virtu, according to "the wall street journal."
many questions about knight's business going forward. tom joyce, the ceo saying his goal is to stay in business. most believes rich reppetto, who was on the program at the top of the hour saying they do need to do some kind of a deal. apparently they are in talks in the early stakes, nothing guaranteed. we'll keep you up to date on what's happening with kcg shares, knight capital. the overall market is at the lows of the day, the s&p 500 off 1.33%. the dow industrials coming off of low, but still looking at a 165-point loss. nasdaq down as well after ecb president talked a lot last week. didn't deliver whats markets were hoping for today. and thus you have energy is down. there's the xle, materials are weak, financial stocks are weak. the euro which was initially higher turned negative and it's been sharply lower throughout much of the session today. there's a look at the xlf.
as i was referenced, the euro lows at the 121.5. the loss of .66%. let's hit facebook now and the hits do keep coming for that company as the stock plunges to a fresh record low. and some of the early believers in that story are bailing on the company now. according to morningstar, 21 fidelity funds are selling shares, there's the facebook debacle mean that social media actually isn't the next big thing? what's the best trade in that space right now? guy adammi? linkedin is doing well, yelp is doing well. nothing else is doing well. >> linkedin relatively. $93. i think the 52-week high is $120. so the stock has sold off. if facebook wants to get into link linkedin business, i don't think
the death knell is that high. i think facebook trades lower here. the space to me, unless you're just want to job around and trade it, investingwise, nothing makes sense, we'll find out more about linkedin today but given the valuation and what's happened to other names, i don't see an interesting entry point. >> facebook seeing all-time lows and shares of yelp jumping big today after reporting second quarter sales that beat estimates and we look to what linkedin will deliver after the bell. let's bring in mark ma haney. welcome back to the show. >> hey, scott. >> linkedin is a bright spot. yelp is bright spot. it seems like nothing else is and the hits keep coming for facebook and just about everything else. mark? >> most of these ipos, i think with only two exceptions have broken issue since they've come out in the last year and a half. i think zilla was one of the very few exceptions to that and
linkedin was really not gone that many places, the stock popped on the first day to $90 to $100 and we're there right now. we only recently upgraded the stock. we wanted to wait to see the numbers for this. we like the stock here. but you're right, valuation is high. so there's very little margin for error in the numbers tonight. >> what's the difference in market sentiment towards a linkedin for example and a facebook. the fact from a pure business standpoint. people actually pay for a service on linkedin, while facebook is still trying to monetize what it does for a living? >> across the internet space, the biggest public market investment thesis change has been mobile. a year ago it was the mobile internet tsunami which was going to raise all boats, although tsunamis don't necessarily do that. what's happened is that the display advertising names, the names that aren't transactions oriented. they've seen a hiccup, barch in
their growth rates, so the mobile has turned winners from lossers notice internet space. we think linkedin is a inwither in part of one of the reasons you mentioned, these are corporations paying for access to users, regardless of whether near coming in via mobile or desk tops. >> mark we're going to be talking about some of these companies in the past tense a few years from now. are we looking at a shake-out that's currently taking place and we're going to remember xyz company as the next pets.com? >> you've got roughly 15 internet ipos that have come out over the last two and a half years. the chance that there's a pets.com is pretty high. one or two probably. the one big difference is that you know with one or two exceptions, all of these companies came public with high margins, tons of cash, they were profitable. they didn't need a second round of funding to get through the next two years, like pets.com did. >> kelly.
>> >> i'm curious, when we looked at linkedin's earnings this evening, it seems like there should be a stat on whether or not they're gaining or losing people or users. that to me is as guy said, no barrier to entry. so somebody could go someplace else. what do i look for to say the lichkedin story continues to if on? >> look for two things, corporate solutions customers should be north of 11,000, up from 10,000 last quarter that should be ticking up about 1,000 each quarter. secondly you should be looking for about 170 million registered users. from the users side that was about 160 million. the company has increased expenses the last two quarters, especially in sales and marketing. we should see the r.o.i. this quarter in terms of increased customers. >> we'll talk to you again soon. now let's get the short story on linkedin, short interest on internet stocks continue to rise. will duff gordon research director at market joins us now.
you know, will, these stocks don't seem to want to go down and the shorts keep piling up. >> the shorts are showing, massive skepticism in most places in terms of the technology sector. with linkedin being the exception, short interest is pretty low. the institutional investors have trebled their investment in linkedin, they love it but are skeptical about the rest of them. >> linkedin to facebook and some other names, zynga, groupon, some other internet names that have really been pounded. >> groupon, you know it's an overused word, record high short interest, about 14% of its free float and it's extremely expensive to short groupon at the moment. if you look at zilla that's probably relative to the free float, the most shorted in this area. and then fuse yoe, another massively shorted name. with a p.e. of about 700 times,
people are very skeptical, so look at stillo, fusio, groupon. facebook is short as well. the cost is ramping up as well. >> what's the sector most shorted in the market overall and what can we take from that. >> retail is pretty shorted. the average is about 3%th and the technology is about 5%, so it's up there. now do you think that there's going to be potential pop, a a short squeeze in some of these things? well typically in different markets like this, it pays to short the most shorted shares, researchers in chicago showed that four out of six months this year, it pays to short on shorted shares. >> will duff gordon. good to talk to you, talk to you again soon. coming up, consumers went on a shopping spree in july, with will their spending ways continue? retail winners and losers, next. you know what i love about this country?
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>> let's get to mary thompson now. >> we'll take a look at kellogg's up 3%. the cereal giant beating the street by a penny in the second quarter and backing the full-year outlook saying it's not impacted by the higher corn prices and the commodities been hedged against the price rises very well this year. so any impact from the drought won't be felt until 2013. back to you. >> what's the deal here, up 3%? >> if you think they can continue to pass prices on the 0 consumers, then you buy kellogg here. it's not a bad play here. >> the consumer may not be dead after all. shoppers looking for bargains helped u.s. retailers to better than expected sales in july. clear winners were names like the gap and nordstrom. for the winners and losers, let's bring in michael banetti. welcome to the show. >> thank you for having me. >> these are better than
anticipated. >> they made june numbers look pretty soft and reaccelerated a bit in july with differences between the names and pretty good numbers. >> what does it tell you about where we stand right now? >> we talked to companies after they reported today and right now the question of how they're feeling heading back to school and much more important than july and we heard a lot of optimism in the channels and we still expect somewhat choppy results in the names and they did sound pretty good today. >> macy's was good. i guess reversing, you know, i don't know the most recent reports been a disappointment if i recall correctly. what name stands out to you in your universe as the best? >> right now we recommend nordstrom over the rest of them right now. they had a low number, the plus one in the month due to noise of the big sale that shifted in to august. the underlying trends are running in the single high digits for those guys right now. macy's very good, as well. 1% in june to about 4% in july so that was a pretty good
acceleration. >> thank you so much. >> thanks. >> steph? >> yeah. we took profits in t.j. we continue to like the offprice retailers. mailing in it and a great month of ross and t.j. and we're buying nike especially in the low 90s. bad news is they're already out. >> bought it on the pullback? >> we did. i think 90 or below it's attractive. >> okay. coming up, now knight capital may have made its own situation worse. era detergent once clobbered a stain made by a meatball. that meatball now lives in hiding, in constant fear that era will one day track it down too. (suspenseful ♪) era. so much fight, it's chuck norris approved.
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herb greenberg is here with now knight capital may have made its own situation worse. herb? >> knight sent out this message to its clients. doo tow a technology issue, knight is experiencing a delay in processing orders of listed securities. we ask that you seek an alternate destination for the execution of these trades and went on and on and screaming sell to a bunch of traders and based on the stock's price and options activity, that's what think did but the biggest question is why did it take hours for knight to confirm that message to us? we were out there calling them right after the message. >> they're under no obligation, herb, to give you a phone call and tell them when they're in the weeds sort to speak. the first obligation's to the clients and customers as much as we would love for them to have called us first. they talk to their customers and clients first. >> the problem here is they're a publicly traded company and as a result you have that ultimate dilemma and the dilemma of all
public securities firms. >> all right. herb, thanks. final trades next. [ chirping ] [ chirping ] ♪ [ chirping ] ♪ [ male announcer ] audi a4 drivers have spoken. [ engine revs ] and they ranked the a4 highest in total quality index in its class. [ chirps ] experience the summer of audi event and get exceptional values on the audi you've always wanted. experience the summer of audi event it's something you're born with. and inspires the things you choose to do. you do what you do... because it matters. at hp we don't just believe in the power of technology. we believe in the power of people when technology works for you. to dream. to create. to work. if you're going to do something.
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